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There seems to be a generally accepted argument that if/when Vancouver’s real estate market hits a downturn it will be Condominium prices that will be hardest hit. This idea seems to be based on a couple of factors: Houses come with land attached which adds value, and Vancouver’s previous experience with the leaky condo disaster hit condo values hard.

In light of this it is interesting to see what the REBGV detached benchmark price has done in the last six months:

As you can see prices didn’t stop rising after the July assessments values were recorded, they continued to rise for a couple of months, peaking in September 2006 and sliding down since then. According to the Real Estate Board of Greater Vancouver the ‘benchmark’ single family detached home is worth just slightly less than it was in July ’06.

The REBGV benchmark for attached and apartments also peaked in September ’06, but neither has dropped below their July value yet:

Attached is pretty flat, while the apartment benchmark dropped about 5 grand before it ticked up slightly last month. Any bets as to when we’ll see the peak price of September ’06 again?

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Akhen

Instead of a relatively few people pussy footing around low balling prices to send a “message” (of overpricing)…the surest way for the message to be felt and received by the seller is for the buyer so stay away.That’s how the cycle works on a micro level and that’s what’s happening now.Give it 12 months. If this is a true top prepping for the downside rather than a short-term correction, you will see short bursts of price increases complemented by steep drops before a sudden real drop when all heck breaks loose.That’s what you’re seeing in the US real estate market. Market recently showed an“unexpected” boost last quarter and everyone is predicting the end of the price downcycle while experts-in-the-know like Bernanke expects further downside.

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loki

patiently waiting: I agree, we're a few months off the peak – I'll wait to see if inventory builds up. Prices always go up and down and I see no compelling reason to buy now.

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patiently waiting

Its too early to bother trying to get a fair deal in this market. Your typical family should not be spending more than about $300K for a home (at a stretch). What can you get for that? A leaky condo in a shady neighbourhood.No, I'll wait a year or two before dipping my toes in with 30% off offers. And it won't be the flippers who'll get money but their lender.

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mohican

I am backing up my assessment of the current RE situaion with my analysis at my blog.

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Jesse

Tangential topic: what did rents do in some US markets 1.5-2 years ago? Discussion here on patrick.net. Can we see rental spot prices following a pattern during a speculative phase?

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the pope

Find something you like that has been on the market for a few months and then offer 20% to 30% below the asking price.Though that may be a shock to some sellers, there are a number of anecdotes from realtors out there (Chipman, Will, etc) saying that even in multiple offer situations most everything is going for below asking price these days and the average seems to be 10-15% below asking price.

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betamax

Way too soon. As someone else noted, the bottom will not come until after the 2010 Olympics, when the last dregs of bullishness are exhausted.Respectfully disagree. By 2010, the economy will be clearly in the sh*tter, no one will have any delusions that the Olympics will save us, and instead everyone will be bitching about how many decades we'll be stuck with the bill.I'm betting that…we won't see the same prices in real terms within my lifetime.That, I do agree with.

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Frank

What amazes me, unless I just haven’t read enough of the postings yet, is the incredible reticence on the part of buyers to actually take some action to deal with the issue of outrageous prices. Instead of sitting around complaining about how awful it is, one of the surest ways to bring some sanity back to the marketplace is to go out there and start making offers on places based on what you think they are realistically worth. Houses are now sitting on the market for months without any offers. It appears that sellers are reluctant to substantially lower the price on the off chance that the market has cooled for reasons other than price. So it is time to send sellers and realtors a clear message. Find something you like that has been on the market for a few… Read more »

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mohican

alpha-bear You could be right and your crystal ball might be more polished than mine! I agree about inflation and the inflation picture could fog things up quite a bit after this initial deflationary spike down to semi-reality in RE prices. BTW – Regarding the pint – we can stick with any premium domestic beer that you wish. Whatever brewery you like. Sleemans is my fave.

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Alpha_Bear

The reason I see September '06 prices matched in nominal terms in 2012 is simple. When I look in my crystal ball, I see a huge slug of inflation surging toward us. Just wait until the liquidity in RRSP's is released! (and not by retirees)

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Alpha_Bear

Is that a $4 pint in 2007 dollars, or 2016 dollars?A pint is a pint. Make mine an Okanagan Spring Pale Ale. (Sold to Sleeman, then to a Japanese brewery, so it's hardly a BC product anymore.)

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loki

I agree with patriotz assessment of the situation. There's a sucker born every minute and it will be a long slow slide down before the majority are confronted with the effect of things like the rental gap, rate increases, upkeep, opportunity cost, etc. and realize that potential upside is already priced in and all risk priced out.It does look like we may have hit the peak, but that doesn't mean we couldn't limp along for years before prices take the big hit that could really hurt a bunch of people.If September WAS the market peak but we don't get hit with any negative externalities it wouldn't be unusual to see a deadcat bounce in the summer. There may yet be some squeezable demand out there willing to sign up for a 30 year term and live off Kraft dinner while… Read more »

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patriotz

I'm betting that we'll see nominal prices matching the September '06 peak in 2012, and that we won't see the same prices in real terms within my lifetime.Way too soon. As someone else noted, the bottom will not come until after the 2010 Olympics, when the last dregs of bullishness are exhausted.Then see several years of flat nominal prices. When real prices return to 2001 levels, we will probably see appreciation return to the historical trend. No bubble like this for another generation (1981->2006->2031).

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Pondering

I would beg to differ with Rob and his assessments of what families do. That may have been true in the past but affordability has simply erased that. At the daycare my child goes to the more frequent topic of conversation is about bunk beds, how to convert a larger bedroom into two smaller ones, etc.There is no more blood to be had from the stone of the average family in terms of housing. In Vancouver you now have to make due with what you have.

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scoop

Is that a $4 pint in 2007 dollars, or 2016 dollars?

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mohican

My crystal ball looks like this for nominal prices (this is total speculation and I'm really just farting around with this stuff here but this is what I meant in my earlier post):2007: -7% to -10%2008: -8% to -12%2009: -2% to -8%2010: 0% to 2%2011: 0% to 2%2012: 0% to 2%2013: 2% to 5%2014: 2% to 5%2015: 2% to 8%2016: 2% to 8%I see this as fairly plausible based on history but really I have no clue and this is just a best guess. Anyone who tells you different is lying, unless its 'the pope' because he's infallible! But this is how I see Sept '06 nominal prices coming around again in 8-10 years. If I'm wrong then I owe someone a $4 pint!

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Alpha_Bear

Can somebody explain the difference between nominal and real prices for those of us who haven't studied economics?Using my knowledge of the inner workings of Google, I found that "Nominal numbers — such as nominal wages, interest rates and gross domestic product (GDP) — refer to amounts that are paid or earned in money terms." While "Real numbers — real wages, interest rates, and GDP — are corrected for the effects of inflation."

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Alpha_Bear

I'm thinking that the coming global real estate crash will be so severe, that no person in their right mind will consider real estate as an investment until all memory of the crash has been forgotten.Like the 1930's, it will be generations before people forget the pain of being upside-down in a mortgage, with declining job prospects.Have you heard about the new requirements for margin trading in the US? It sure looks like 1929 redux to me.

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loki

Can somebody explain the difference between nominal and real prices for those of us who haven't studied economics?

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aetakeo

alpha_bear: I personally think it's entirely possible that we'll have a 10 year downturn, followed by another bubble. Vancouver loves a housing bubble and real estate speculation.

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Alpha_Bear

I'll bet a pint that we won't see Sept 06 nominal prices again until about 2015-2016.Inventory is increasing and sales are decreasing. The nominal price declines will take place through 2007 until 2009 followed by 4-5 years of stagnation and no real growth in prices.I'm a bit confused. If prices decline for several years, and then stagnate for several more, how can nominal prices match what they are now?Did you mean that nominal prices would then increase to match today's prices, or (I'm hoping this is not the case, since you appear to the economic's guru around here) did you mean real prices when you typed nominal prices?I'm betting that we'll see nominal prices matching the September '06 peak in 2012, and that we won't see the same prices in real terms within my lifetime.

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the pope

I don't know mohican, Though september may have been the peak, We might still have some buyers out there that buy the hype and create a mini bump up in the spring/summer. It sure looks like we're running into an affordability wall though.The drops in SFH & Apartment prices looks like we might have problems getting buyers who can afford these prices: first timers for apartments and 'move-up' buyers for detached. I wonder if the flatness in attached units is demand from families that can't afford detached prices?As Rob Chipman has pointed out, new families with kids tend to be buyers that can't wait and feel they need to buy something no matter what the market. Will this keep attached prices safer than entry level apartments or expensive houses?

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mohican

I'll bet a pint that we won't see Sept 06 nominal prices again until about 2015-2016.Inventory is increasing and sales are decreasing. The nominal price declines will take place through 2007 until 2009 followed by 4-5 years of stagnation and no real growth in prices. My Blog

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Paul

Nice graphs!

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TQN

no bet here. however, i bet that the chmc guy wanna bet against your bet; and likely that the pope would win the bet and the chmc guy would lose the bet.

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